Tuesday, June 24, 2025

Texas Just Launched a Four-Pronged Attack on the Housing Crisis

This legislative session has culminated in a landmark victory for property rights and housing affordability in Texas. Thanks to the tireless work of advocacy groups like Texans for Reasonable Solutions, which championed this entire suite of bills, Governor Abbott has now signed four powerful pieces of legislation that represent the most significant pro-housing reform the state has seen in decades. This isn't a single, timid step; it's a coordinated, multi-front assault on the regulatory red tape that has driven up housing costs and limited options for Texas families.

For years, we've watched major Texas metros grapple with an affordability crisis born not of scarcity of land or lack of demand, but of an ever-growing thicket of municipal ordinances. These four new laws—HB 24, SB 840, SB 2477, and the capstone bill, SB 15—take direct aim at the root of the problem: artificial constraints on supply. Let's break down each of these strategic wins.

1. HB 24: Ending the "Tyrant's Veto"

One of the most pernicious, anti-growth mechanisms in Texas zoning has been the "protest-by-a-small-minority" rule, rightly dubbed the "tyrant's veto." Under the old law, if owners of just 20% of the land area near a proposed zoning change objected, it triggered a supermajority vote (three-fourths) of the city council for approval. This gave a handful of NIMBY ("Not In My Back Yard") neighbors disproportionate power to block new housing projects that a simple majority of elected officials, and likely the community at large, supported.

Championed by Rep. Dustin Burrows and Sen. Bryan Hughes, HB 24 fundamentally restores fairness to the process. The bill targets the most common use of the veto by raising the protest threshold for adjacent property owners to 60% and, crucially, removes the supermajority requirement for those protests.

The result: A small group of opponents can no longer single-handedly kill beneficial projects. This strengthens property rights for landowners who wish to develop housing and empowers city councils to make decisions for the good of the entire city, not just a vocal few.

2. SB 840: Turning Underused Commercial Strips into Homes

Drive through any major Texas city, and you'll see them: aging, half-empty strip malls, vast parking lots, and underutilized commercial corridors. This is what I call "greyfield" land—already developed and served by infrastructure, yet failing to meet its economic potential. SB 840, led by Sen. Bryan Hughes and Rep. Cole Hefner, provides a powerful tool for recycling this land into something far more valuable: housing.

The bill allows residential and mixed-use housing to be built by-right on land zoned for commercial or retail use in Texas's largest cities. This means developers can bypass the lengthy, expensive, and uncertain rezoning process to build multifamily or mixed-use projects. The law builds on the stunning success of similar reforms in Florida, which saw over 15,000 housing units approved in its first year.

The impact is threefold: It unlocks a massive supply of land for infill development, which reduces sprawl and conserves precious farmland. It puts downward pressure on rents by increasing the housing supply where it's needed most. And it revitalizes unproductive commercial areas, turning them into vibrant, walkable neighborhoods.

3. SB 2477: Unlocking Empty Offices for Housing

The post-pandemic world has left Texas cities with millions of square feet of vacant office space. Houston and Dallas have some of the highest office vacancy rates in the nation. This is not a cyclical dip; it's a structural shift. SB 2477, from Sen. Paul Bettencourt and Rep. Jared Patterson, offers a common-sense solution: let people live there.

Much like SB 840, this law legalizes the conversion of vacant office buildings into residential housing by-right. It streamlines the process by waiving costly and often unnecessary requirements like traffic impact analyses and new parking minimums that were designed for a commercial-use building, not a residential one. With polls showing 71% of Texans support this idea, it's a clear policy winner.

This is the definition of sustainable growth—recycling existing structures to meet a critical need without using an inch of open space.

4. SB 15: The Starter Home Revolution

The final and perhaps most crucial piece of the puzzle is SB 15. With an overwhelming 90% of Texans viewing housing costs as a problem, the need for more attainable options is undeniable. For decades, many cities have used large-lot zoning requirements as a tool to mandate low-density, high-cost housing, effectively outlawing the construction of more affordable "starter" homes.

SB 15 takes direct aim at this exclusionary practice. In Texas's largest cities (150K+ population in counties of 300K+), the law now limits a city's ability to impose a minimum lot size greater than 1,400 square feet in new subdivisions. It also reigns in excessive setback, height, and bulk rules for these smaller lots, giving builders the flexibility to provide a wider range of housing products.

We don't have to guess at the results. Houston’s pioneering 1998 reform provides a real-world case study, resulting in a boom in townhomes that in 2021 averaged just $310,000 compared to $545,000 for traditional single-family homes. Analysis shows the potential is enormous: Dallas could add over 120,000 starter homes and Fort Worth could add 26,000 on available land under the new rules. This is the kind of sustainable, market-driven solution that encourages infill development, conserves farmland, and boosts tax revenue per acre.

A New Era for Texas Housing

Individually, each of these bills is a significant victory. Together, they represent a paradigm shift. The Texas Legislature and Governor Abbott have sent a clear message: the state will no longer allow arcane local regulations to stand in the way of housing production. By neutralizing the NIMBY veto, unlocking underutilized properties for residential use, and allowing the market to build the smaller, more affordable homes that Texans clearly want, this legislative session has laid the foundation for a more prosperous and affordable future for our state.

Labels: , , , , ,

Sunday, June 01, 2025

HCTRA Update: Legislative session is a bust for reform, but no action is better than bad action

This week we have another excellent guest post from Oscar Slotboom.
In December I reported on HCTRA's massive diversions of toll revenue, financial mismanagement and dismal project delivery (part 1, part 2). Bill King has reported (1, 2) on HCTRA's lack of financial controls and poor transparency. Investigative reporter Wayne Dolcefino has exposed HCTRA's slush fund and financial improprieties. The Dallas Morning News did an extensive report called "Toll Trap", documenting how toll road agencies statewide work against the public interest.
So as the Texas legislature convened in January I was hopeful there would be legislation to reform HCTRA and perhaps toll roads statewide.
The result: nothing relating to HCTRA passed. In fact, I don't see a single meaningful bill statewide relating to highways, toll roads, high speed rail or public transit which passed. (search by subject) (Some non-meaningful bills like naming sections of highways passed.) The legislature was not in a mood to do anything relating to transportation.
However, getting nothing done is better than something that does more harm than good, which seemed likely in May for HCTRA. After bill SB2722 was approved by the Senate and seemed poised for a House vote, perhaps Harris County Commissioners Court will take the initiative to improve HCTRA management, project delivery and financial transparency. If not, we can hopefully get legislation in 2027 with meaningful reform and cleanup of HCTRA.
SB 2722: Initially disastrous, amended to be tolerable, then dies
Just before the bill filing deadline, Senator Bettencourt introduced SB2722 targeting HCTRA. When I read the text I was horrified.
  • It mandated that 100% of toll "surplus revenue" is distributed to Harris County and the City of Houston (CoH).
  • The City of Houston would receive 30% of surplus toll revenue, ostensibly for providing emergency services on toll main lanes in Houston.
  • There was no limit on the annual diversion of toll revenue, and the diversion continued in perpetuity.
  • The bill's only redeeming quality was that it strictly required Harris County to use toll diversions for road improvements and imposed an audit to verify compliance. There was minimal restriction on use of the funds by CoH.
Let's consider these bill features one at time.
On point 1, "surplus revenue" is somewhat ambiguous but would likely be very large. HCTRA reported income of $410 million in 2023 and $407 million in 2024. Harris County and CoH would be incentivized to maximize surplus revenue to maximize legally-mandated diversions into their budgets. How to do you maximize surplus revenue? First, you build as little as possible. Second, you issue bonds when you do build a project, instead of using available toll revenue. Third, you keep tolls artifically high. This is exactly what HCTRA is already doing, resulting in dismal project delivery, more debt and high toll costs to the public.
A legally mandated diversion of surplus toll revenue sets a very bad precendent. SB2722 basically says that surplus toll revenue should be diverted to local governments, potentially to spend as they please, which undermines already underfunded transportation resources.
On point 2, the huge payoff to CoH is totally unjustified. 30% of HCTRA profit in the last two years is around $120 million per year. Harris County took the initiative and risk to launch HCTRA in the 1980s. HCTRA continuously invested to expand the system and grow revenue. CoH did nothing. HCTRA says they spend $43 million per year to handle 98% of incidents on the entire system (not just the sections in CoH). This is entirely consistent with my observations, since I see HCTRA assistance and constables on the toll roads all the time, and I virtually never see Houston police or fire/ambulance. Yet CoH made the highly implausible claim that they spend $19 million per year handling incidents on the toll road main lanes in Houston. Even if $19 million was valid, the likely payout to CoH would have been vastly larger, with few strings attached.
On point 3, the original version of the bill passed out of committee had no limits, not on diversions of toll revenue, and not on duration of diversions. HCTRA bond payments are slated to drop in the future (although this may change as HCTRA issues more debt), and revenue will probably increase. It is plausible that around 60% of revenue would be "surplus" revenue in the future. (Net income was 45.7% or toll revenue in 2023 and 46.5% of toll revenue in 2024.) Of course, governments expand to spend revenue and it could become difficult or impossible to stop the diversions in the future.
On point 4, there was a strict requirement that 95% of the share of surplus funds going to Harris County (which would get 70% of the surplus amount) must be spent on roads using a new formula for distribution. But of course money is fungible. More toll money going to Harris County means money normally slated for roads could be used elsewhere. Restrictions on the use of funds by CoH were minimal, simply sending the money to the police and fire departments.
SB2722 passed out of committee on a 6-3 vote on April 16.
Amendments, House Substitute, then it Dies
On April 29 SB2722 reached the Senate floor for a vote. It was amended to place an $80 million annual limit on toll revenue diversions to CoH and ended diversions to CoH in 2030, passing on a 21-8 vote. But there was no limit on diversions to Harris County.
The House Transportation Committee considered the bill on May 13 and submitted a committee substitute, which limited payments to CoH to $25 million per year and retained the expiration in 2030. There was still no limit on the toll revenue which could be diverted to Harris County. This version was far better than the original version, but provided no requirements for Harris County to build toll system projects and no protection for toll payers.
The House substitute was never placed on the calendar for a House vote. On Thursday May 29, the Houston Chronicle officially declared SB2722 dead. Yay!
Statewide
While HCTRA mismanagement is the main problem in Houston, overzealous criminal prosecution of individuals with unpaid tolls is the main problem North Texas and was the focus of extensive reporting by the Dallas Morning News. (overview, Houston case study)
"Each year, thousands of drivers are hauled into court for unpaid fees. Some have their car registrations yanked and others are sent to jail even when they have proof the fees they were charged are incorrect. These practices make Texas one of the country’s harshest and most unforgiving states for unpaid toll fines, the investigation revealed."
"Texas is one of only a handful of states that criminalize toll drivers for unpaid fees and where courts regularly issue arrest warrants over the debts."
All bills relating to toll roads, including toll billing reform, died in committee. A highly controversial bill related to the use of public transit sales tax in North Texas also died.
The reality for this session of the Texas Legislature is that there was no appetite to do anything relating to toll roads.

Labels: , , ,